Q4 2024 Lithium Argentina AG Earnings Call
Regina: Hello, and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Lithium Argentina AG 4th quarter and 4th year 2024 earnings conference call.
Regina: All lines have been placed on mute to prevent any background noise.
Regina: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad.
To withdraw your question, press star 1 again.
Speaker Change: We kindly ask that you please limit your questions to one and one follow-up. I would now like to turn the conference over to Kelly O'Brien, Vice President and the Investory Liaison and ESG. Please go ahead.
Kelly O'brien: Thank you for the introduction. I want to welcome everyone to our earnings conference called this morning. Joining me on the call today to discuss the fourth quarter results is Sam Teggett, President and CEO . Alex Shoga, VP and CFO will also be available during the Q&A session.
Kelly O'brien: Before we begin, I would like to cover a few items. Our fourth quarter and 2024 full year earnings press release.
Kelly O'brien: I remind you that some of the statements made during this call, including any production guidance expected company performance update on the regional development plan, the timing of our projects and market conditions may be considered forward looking statements.
Kelly O'brien: Please note the cautionary language about forward-looking statements in our presentation and DNA and news release. I will now turn the call over to Sam.
Thanks Kelly. Good morning everyone.
Sam Teggett: And thank you for joining us today. This year was a landmark year for us, and I'm very proud of what the team was able to accomplish.
Kelly O'brien: First and foremost, Cachari Ovaraz mentally met that exceeded its annual production targets becoming the largest producer of lithium carbonate in Argentina.
Sam Teggett: Working closely with our partner GANFANG, we enhance the organization of Cachari at the military's talent, pulling from both companies to strengthen the operations team.
Sam Teggett: I believe the team's dedication to innovation and focus on operational act once will continue to set us apart in 2025 and beyond.
Sam Teggett: We will discuss this later in more detail but on the balance sheet, through several strategic transactions and financing, we were able to bring down project level debt and extend maturity. At the same time, corporate costs were substantially reduced with more focus on the operations.
Sam Teggett: Finally, we completed a corporate migration where in recent months we moved our corporate
Sam Teggett: This division was driven by our shareholders, where we received over 99% approval for the migration.
Sam Teggett: The move should give us added strategic and financial flexibility going forward.
Sam Teggett: On the call today, I will discuss the 2024 operational and financial results and expand on opportunities we see to create value for our shareholders.
Sam Teggett: During 2024, our goal was to produce 20 to 25,000 tons and we exceeded the high end of this range producing 25,400 tons.
Sam Teggett: As targeted, we delivered these strong volumes as a result of consistently increasing production months on month. We ended the year reaching over 90% capacity in December , demonstrating the capabilities of this plant and our team.
Sam Teggett: The operation has also achieved the significant milestone by receiving three distinct ISO certifications, reaffirming our commitment to excellence and responsible business practices.
Sam Teggett: We are proud of our track record, given the well-known challenges in the industry ramping up new chemical plants or expansions. We attribute the success to the experience brought by our joint venture partner, Dan Fang, and also the culture of collaboration and a single team effort in Who We.
Sam Teggett: We expect production volumes during 2025 to exceed production volumes seen in 2024 and have set guidance of between 30 and 35,000 times.
Sam Teggett: With the ramp-up last year, we identified a number of opportunities to reduce maintenance costs and improve recoveries in both the pawns and at the plan.
Sam Teggett: We are taking several actions to implement changes this year, and expect the related plan planned down time will impact production during the first half of the year. Accordingly, production volumes during the second half of the year are expected to be higher than the first half, and this is reflected in our full year guidance.
Sam Teggett: These actions should result in stronger performance for years to come.
Sam Teggett: As mentioned, we surpassed production guidance during 2024, achieving 85% operating capacity during the fourth quarter. With the achievement of commercial production and an effort to provide greater transparency, we have included cash costs for 2024.
Sam Teggett: We were quite proud that average cash costs during the year were $7,100 per ton.
Sam Teggett: During the fourth quarter, the costs were $6,600 per tonne, showing the operations ability to bring down unit costs as we move closer to design capacity.
Sam Teggett: For 2025 we expect operating costs to be similar to those in 2024 with sustaining CAPEX around $600 to $700 per time.
Sam Teggett: In January , we updated our technical report on stage 1 with a long-term cash operating cost estimate of $6,500 based on our current operating performance.
Sam Teggett: We feel quite confident in this long-term estimate and believe that as we continue to optimize costs and look at new processing technologies, which we'll touch on later, we could bring these costs down even further.
On the Lithium Argentina side.
Sam Teggett: We maintain a healthy balance sheet with a cash ground of $86 million and no material funding requirements expected at the project level. In 2024, we decreased our general and administrative costs by 30 percent, exceeding our 25 percent reduction target and maintained an
Sam Teggett: Over the last year, we've been able to improve our Lithium margins under challenging market conditions.
Sam Teggett: In 2024, FastMarket's battery quality was in carbonate price, so another 27%.
Sam Teggett: Lithium carbonate being sold from Cachari Oldera's today is largely going to our partner again thanks for using the LFP market.
Sam Teggett: Our pricing is based on battery quality, market price, adjusted for the quality of the product which contains trace levels of impurities.
Sam Teggett: During 2024, its quality improved, we were able to decrease the price and discount significantly.
Sam Teggett: For 2025, it was further reduced, leading to an over 50% improvement from our first sales. Overall, we are very pleased with our current pricing arrangement, which is supported by third party quotes.
Sam Teggett: As market prices recover, we expect this adjustment to shrink significantly as roughly 50% and relate to the 6th cost
Sam Teggett: Looking forward, we continue to focus on improving and stabilize in our product quality, and to maintain flexibility to be able to sell our product directly to customers globally as the LFP market develops.
Sam Teggett: Alongside the operational success, we also improved and de-risk the financial position of
Sam Teggett: Project level debt was reduced from 350 million at the start of last year to 210 million 100% basis.
Sam Teggett: This was accomplished by reducing debt at the joint venture with a significant portion of the proceeds from the PASO's Grandets Transaction and favourable from changes in the FX. We were also able to replace the short-term dollar-length debt with long-term bond and bank facilities.
Sam Teggett: In November , in response to melee financial reforms, we were able to raise $15 million than a domestic Argentina bond offering at an 8% interest rate with a three-year term.
Sam Teggett: Working with GANFANG, we were able to access low cost debt from international banks.
Sam Teggett: A further 100 million of short-term debt was replaced with long-term bank facility at attractive rates.
Sam Teggett: And more recently we received an additional 150 million bank facility which we expect to be available in Q2 to draw on as needed to give us additional financial flexibility.
Sam Teggett: The terms are even better than our existing long-term debt and highlight the benefit Genfeng brings both technically and financially to this project.
Sam Teggett: But that is clear that we built a strong foundation to support our future growth plans.
Sam Teggett: Working with our partnered GANFANG as the global leader in Lithium processing, we see a strong opportunity to leverage advanced processing technologies to enhance these plans.
Sam Teggett: As part of this, we are excited to announce that we will be installing a 5,000 unparalleled DOE demo plant at site.
Sam Teggett: This plant is expected to leverage higher concentration brine from the solar evaporation pre-lining concentration ponds and use the technology that includes the solvent extraction bait, DLE, that was developed by GANFANG.
Sam Teggett: The demo plant will integrate at the stage 1, whereas expected to streamline the downstream process to lower reagents, increase recovery, improve product quality and keep water usage well.
Sam Teggett: This new technology has been validated in China using brine from Kachari Oloraz and will now be demonstrated at the commercial scale demo plan.
Sam Teggett: In the early March, the provinces of the U.S. granted the required permits and development is underway on the plant in China. Commissioners expected to begin by the end of 2025.
Sam Teggett: Based on the ongoing development work, we expect this new technology to support our future growth plans for stage 2 of Cachari Oraz. And it's being used for regional growth plan in Sulta.
Sam Teggett: We remain optimistic about the continued needs for low cost and large scale lithium operations like a charity to meet growing demand.
Sam Teggett: Especially for projects with existing infrastructure, strong process and expertise, improving teams that can lower costs and reduce execution risks.
Sam Teggett: With our partner Genseng, we are considering plants and line it over 200,000 times for animability capacity in Argentina.
Sam Teggett: While we are not committing to any significant capital investment today, given the long-lead time items and successful results from stage 1, we are accelerating development work to define our long-term plans at Cachari and in the region.
Sam Teggett: At Cachari, we are considering an additional 40,000 tons grant of L.D. capacity for stage 2. We've completed substantial work on the upstream pond design and looked to integrate this work with new processing technologies.
Sam Teggett: Similarly, we continue to advance a regional development plan on our properties in Solta.
Sam Teggett: Here, in collaboration with Genseng, we're here in advanced stages of finalizing a multi-phase development plan with a combined LCE capacity targeting 150,000 tons per annum, using similar solar evaporation cons and daily process.
Sam Teggett: This plan incorporates resources from Gen-Thanks, as well as pastless grandad projects, and are jointly on pastless grandad and in the top level of PUNA projects.
Sam Teggett: We believe that the newly passed riggy regime will provide several very attractive fiscal incentives to support large-scale investments like this in the country and will help support the development of our comprehensive growth pipeline.
Sam Teggett: In closing, we have strong fundamentals in a clear vision. We will build on success with the largest lithium operation in Argentina, incorporating the latest and best technology available for our brine resources.
Sam Teggett: and advancing future growth plans while we take advantage of the new rigging instead of available in Argentina.
Sam Teggett: Our performance has demonstrated the strength of our team and our ability to execute at scale. We are optimistic about our strategic position in the Lithium market. A low-cost operation, low-class portfolio project, and a collaborative partner put it in an excellent position to capitalize on this growing market.
Sam Teggett: That concludes our prepared remarks and we will now open up the line for questions.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star, then one on your telephone keypad. We kindly ask that you please submit your questions to one and one follow-up. Our first question will come from the line of Joel Jackson with BMO capital markets. Please go ahead.
Speaker Change: Hi there, it's Evan Nong for Joel today. It looks like you're expecting Catari's realized price discount to benchmark covenant prices to reduce by about $1,000 per ton versus Q4 realizations.
Speaker Change: How much of this reduction is coming from VAT accounting versus reduced quality penalties?
Speaker Change: Thanks for the question. Yeah, you're right. So in Q4, the total adjustment was just over 3,000 dollars a ton, what we disclosed with these.
Speaker Change: with this Q4 year end with that total discount will drop to $2,100 per ton.
Speaker Change: That's a price and arrangement that considers both taxes, VAT logistics as well as the processing fee. Roughly 50% of that is fixed and 50% of that is variable, so it is an indication that product quality continues to improve.
Speaker Change: Okay, perfect. Thank you. And just one more if you don't mind. Is Caterio or those catch the positive at current Lithium prices? And what improvements are possible in this regard? Assuming flatish Lithium prices in the future.
So today's price is we're operating cashful and positive.
Speaker Change: I think what we've done in this disclosure is an effort to improve transparency, so we've released operating cash flow, sustaining CAPEX, and I think in Q4, as we got to 85% operating capacity, I think we've demonstrated the unit cost.
Speaker Change: are trending down with volume. So I think this year, you know, the focus is very much on stabilizing operations.
Speaker Change: That means improving recovery as well as producing a higher quality, more consistent product which should all improve margins going forward.
Speaker Change: Our next question comes from a line of David Deckelbaum with TD Cowan. Please go ahead.
Everyone, thanks for taking my questions today.
Speaker Change: Let's just curious as to follow up on on the pilot plant this can you just articulate you know the
Speaker Change: The benefits of this process with future expansion at Kichari and perhaps...
Speaker Change: other other projects in the region relative to your prior designs, what sort of like the primary bullets that you hope to achieve with with this DLE tech relative to maybe the incremental cost that it would would deliver.
Speaker Change: Sure, so I think firstly this DLE is being integrated into stage 1.
Speaker Change: I think it's important to note that this is one part of the process so specifically it's the solvent extraction modules that will be integrated into our stage one where we already have existing infrastructure or camp. We can tie into the existing pre-concentration pawns.
Speaker Change: and we can tap into the existing Ix and carbonation plant.
Speaker Change: So, it's really to validate this technology focused on our growth plans.
Speaker Change: The benefits really from this DLE plant are a lower pond footprint overall, so targeting approximately two thirds of the footprint that would be used in a conventional expansion, in addition to which the ATX plant.
should validate higher recovery.
Speaker Change: as compared to conventional. So it's both a validation process which is critical for our growth plans and the major outcomes are lower cap X intensity versus conventional and slightly improved all-backs.
and I guess, is there?
Speaker Change: Are there plans or technologies or processes that you're exploring that would...
Speaker Change: went to the current flow. She helped upgrade the product locally as opposed to selling it at the technical grade.
Speaker Change: Yeah, I mean, on stage one, we continue to work with GANFANG on this year on optimizing product stability and improving product quality. So what we saw through last year was...
Speaker Change: continued improvement in product quality had in towards battery quality. We saw the adjustment reprocessing C come down considerably I think 50% improvement versus our first sale so we continue to see improvement in terms of the realized pricing for the product.
Speaker Change: I think, you know, the goal remains amongst the shareholders to be in a position that sell this product globally without having to go through China and having to be reprocessed. So it's something that we continue to work on with stage 1.
Speaker Change: I think for this daily demonstration plant, which is really oriented towards our growth projects.
Speaker Change: The expectation is that it could improve product quality off the bat, but it's not to say that stage 1 is not going to achieve a position where we don't experience discounts in the future.
Speaker Change: Our next question comes from the line of Corinne Blanchard with Deutsche Bank. Please go ahead.
Speaker Change: Hi, good morning everyone. The third question is on the cadens that we can expect throughout the year. Can you just give a little bit more detail around the schedule maintenance in our much of an impact in the production with that bring in the first half and then what would be the expectations for the civil life?
Thanks for in.
Speaker Change: So what we saw in Q4, you know, as we got to 85% operating capacity and then in December we pushed about 90% operating capacity. We identified certain areas to optimize just in order to kind of sustainably achieve near-name plate capacity. So we're undertaking those.
Speaker Change: changes in the first half of this year with planned downtime. So the expectation is obviously for the second half volumes to be higher than the first.
Speaker Change: All right, thank you. And then maybe to come back on the cash cost profile. I mean, I think he forked you with showing improvement. How much more room over the next 24 months do you have to get those cost maybe below 6000 or should we expect 6 to 7000 being kind of your one right?
Speaker Change: I think what we demonstrated in Q4 is that, obviously, unit costs are...
Speaker Change: It's very sensitive to overall volumes and so in Q4 at 85% operating capacity, a 500 tons.
Speaker Change: unit operating cash costs were approximately 6,600 so that's not achieving nameplate capacity in addition to which there are a number of
Speaker Change: Priorities this year as we optimize and stabilize production that should lead to lower cost.
over the next, as you say, 24 months.
One of them is, you know, reagent consumption.
Speaker Change: As production stabilizes, I think we'll have a much clearer understanding of how we can lower specific consumption across our reagent portfolio.
Speaker Change: in addition to which, you know, as we transitioned out of the ramp up last year into steady state production this year.
Speaker Change: You know, we have a we're in a better position to make.
Speaker Change: You know important changes in terms of the workforce that can't which should then drive down costs as well so.
Speaker Change: I would say, you know, the tech report, which pointed to a 6,500 per ton estimate, was really a function of what we could demonstrate to the QPs at the time. I think we're not going to be satisfied at that operating cost. Certainly, again, things.
Speaker Change: And us are very committed to making this one of the, if not the lowest cost producer in Argentina and competitive globally.
Shannon Gill: Our next question will come from the line of Shannon Gill with core mark securities. Please go ahead.
Shannon Gill: Thank you very much, Sam and team, and consultant and foliar results.
Speaker Change: in terms of just falling up on the phase one optimization plan this year.
Speaker Change: Including the first half of the land downtime, is this related to optimizing just the final purification steps and in specific is this the
Speaker Change: Can you provide any timelines on when you hope to get to a battery grade and or name plate?
Speaker Change: The optimization work that we're doing right now is to be able to sustain near- or at-name-play capacity.
Speaker Change: And so in Q4, as we kind of guided through last year, the objective was to reach in your name for play capacity, which we did in December at over 90%.
Speaker Change: The optimization work here is really around reducing overall kind of maintenance costs.
Speaker Change: As well as we've identified certain areas that need to be augmented in order to support near-name play capacity.
Speaker Change: In terms of the battery quality objective, I mean this is a strong align.
Speaker Change: Priority for both shareholders to be in a position to sell this product globally which means a final product being sold globally so it's something that we continue to work on the product quality continues to improve.
Part of that is
Speaker Change: production stability and product stability ensuring that trace levels of impurities are consistent which all should deliver improved realized margins for the project and the shareholders.
Okay, thanks for that. And just...
Speaker Change: follow-up, I suppose, on timelines beyond the Plan Demo Plant being completed at the end of this year and commissioning starting then.
Speaker Change: Can you give any insight into the timelines for when we'll see maybe an updated technical report for phase two or more more information on the sort of pastest ground-based plan of operations there?
Sir, yeah, so on Kateri stage two
Speaker Change: We've completed a lot of work internally on the upstream pawn capacity and the well fields.
Speaker Change: The plan now is to work with GANFANG to integrate this into the new dearly technology.
Speaker Change: So we're working with them on this process and expect to have a lot more to disclose later this year. On PPG, we've received the initial development plan from Golder, and we're reviewing this with Ganteng.
Speaker Change: Right now based on the work completed, I think we're very pleased with this draft report, but obviously need to kind of align and work with GANFANG to finalize this and expect to have this disclosed this year.
Speaker Change: Once again, for any questions, press star one and our next question will come from the line of Mojapat to DB with National Bank. Please go ahead.
[inaudible]
Thank you.
Speaker Change: Thank you for taking my question. My first question would be on your third-party loan then congrats on the refinancing of the long-term debt there into 2027. I just wanted to get a better understanding of what you expect from the 150 million that is expected to close in Q2 2025. Well, that be used to repay the portion that was now recovered or refinanced from the 150 million or do you have any other plans for that? Thank you.
Speaker Change: Thanks for the question. The additional $150 million is being secured.
largely through
Speaker Change: through GANFANG extraordinarily attractive rates. So the view on that is we're going to use a portion of it to repay existing short-term debt at the project level.
Speaker Change: and the rest we will use to provide us with greater financial flexibility. This is a facility that's not going to be immediately drawn obviously, but it's prudent in this market condition to just add this flexibility, particularly at the interest rates that we've been able to achieve.
Speaker Change: Yeah, thanks, that's very clear. And then just a second question, just to follow up on the DLE client and from my understanding, so you're looking for better recovery there, would you be able to give us any color in terms of the magnitude of recovery potential improvement that you could see from an implementation of that plant or it's still early works on that one.
I think I think it
Speaker Change: Too early to say, I mean, the purpose of this DOE demonstrates that demonstration plan is to validate this technology for our growth plans. I would say it would be an order of magnitude of 8 to 10 percent improved recovery is on a universal basis.
Speaker Change: And that will conclude our question and answer session and our call for today. Thank you all for joining. You may now disconnect.